Whenever credit card customers go for a balance transfer offer, there are certain caveats involved which they should be aware of. There are certain parameters involved in balance transfer offers, which are more important than the others. Customers have to look at these aspects of the offer to determine the profitability of the balance transfer offer before going to check the fine print. These 5 parameters are quite essential to ensure that taking the balance transfer offer doesn`t backfire.
Balance transfer fee
The percentage of the balance transfer fees is an important aspect. Irrespective of what other features are offered, if the balance transfer fee is too high then the offer is not worth accepting. A lot of credit card issuers offer balance transfers with a fee higher than 4 - 5%. If the outstanding balance is 1000 dollars this would be around 50 dollars. In most cases, this starts eating into the interest savings by a 0% offer and turns it into a less attractive deal.
This is one of the more important parameters of a balance transfer offer. The initial APR determines how good the offer really is because that is what is going to attract a customer to take up the offer. In a lot of cases, customers are offered 0% APR during the promotional offer. This means that there is no interest on the outstanding balance during the initial period. This reduces the pressure that customers often feel with the high interests accumulating on top of the credit card debt.
Not only is the lower interest or 0% interest important, it is also critical to have the period long enough to last for some time. This helps to reduce interests and save some money. If the introductory period is longer than a year, it definitely becomes an attractive proposition. For a 1000 dollar outstanding balance, if your older credit card charged you at 15% APR, then you will still save 150 dollars if the introductory period lasted a year. This is a sizeable saving which makes the balance transfer offer worth taking up. If it is less than 6 months, the offer is not really worth the effort.
Not only is the balance transfer fee a troublesome one to avoid, there is another kind of fee that credit card customers should be careful about. Annual fee is generally waived off in the first year, but that cannot be taken for granted. If there is an annual fee on the cards, and it is in excess of 50 dollars, then, combined with the balance transfer fee it might negate the benefit of 0% offer. That is where the card holder should rethink on the idea of taking the balance transfer offer.
APR after the introductory period
This is finally something that needs to be looked at. The initial offer might be brilliant, but if the APR after the introductory period is high, the credit card is not worth using as it brings the danger of high interests once again.